Property

Potential Investment Value On Toronto Condo Market

There are few places you can call 9-1-1 and get emergency service in over 150 languages and Toronto is one of them. Canada’s biggest city and its economic engine has seen its share of, shall we say, odd publicity of late, but despite mayor Rob Ford’s bizarre antics Toronto remains one of the world’s most liveable and welcoming cities. Its diversity and social progressiveness are beacons of urban life and no matter how nutty things get at City Hall (it looks like a space ship, what do you expect?) the city lands on its feet.

Moving InAs unchanging as Toronto can seem, like dozens of other urban centres around the world, its demographics are shifting. Perched on the shores of Lake Ontario, the city (GTA) of just over 6 million adds 90,000 new residents each year, and boomers are giving up their high maintenance suburban homes and moving back downtown—which is completely safe to live in; the convenience has propelled downtown to the top of many a young professionals’ wish list. It’s not surprising everyone wants to live downtown when the city has put a great deal of effort into urban renewal. The revitalised Distillery District, King West and Roncesvalles Village are among Toronto’s most in-demand locations.

The shift to apartment living has underpinned Toronto’s condominium boom — Toronto builds more condos than any other city in North America — with no signs of slowing. “The mix of extraordinarily low interest rates and good access to credit has helped to sustain the decade-long housing boom in Toronto,” begins Total Team Realtors’ David Tsaparis. “Average annual price gains have run at an above-trend 6.5-10 percent (higher in prime areas) per year since 2002. In the new home construction sector, much of the boom has been focused on multi-residential building activity, which in turn has been supported by recent government efforts to promote intensification and the growing attractiveness of the condominium market for developers and buyers.”

Solid GroundCompared with other parts of Canada, and despite moderating prices due to the sheer volume of buildings going up, Toronto still ranks at the upper end of the national price scale. “Toronto is still leading the way with increasing property values and sales transactions. The rental market has been very strong in the downtown core,” notes Tsaparis. As Jennifer Chan at the Yorkville branch of Forest Hill Real Estate sees it, with prices continuing to rise and make the city unaffordable to many, rentals will jump. “Condos are filling the housing gap as there are no new rental apartments being built. Ironically, this demand for new condos and their amenities is keeping rental rates high in the downtown core — roughly CA$3 (HK$ 21) per square foot in prime buildings,” she says. Chan’s found herself in bidding wars for units in prime locations like Yorkville and Bay Street (how very Hong Kong), though rental rates should ease up once more new supply hits the market.

Does all that make Toronto a strong investment option? “You will find more investors at the beginning of [a] project, but by the time the building is completed and ready for occupancy, you will find a good mix of both end users and investors. Investors investing in the core of the city of Toronto will experience much higher capital gains on a yearly basis than yields. Rental yields are approximately 5.5 percent,” says Tsaparis. Any given development can take years to complete, and while there are still speculators in the market, the fundamentals are there. “Investors have a large pool of potential tenants if they choose to lease out their units rather than sell them. The vacancy rate is very low, around 1 percent, and people continue to flock to the city,” Chan adds. They’re coming to work in Toronto’s finance, media, information technology and increasingly hospitality and medical industries.

Spoilt for ChoiceFor investors there’s plenty of stock to choose from, be it from venerable existing buildings or new developments. Perpetual hotspots include the Yorkville area — a haven of hippie culture in the 1960s — and the Bay Street corridor, which runs straight through the financial district to the lake. The burgeoning Liberty Village at King and Dufferin streets is another vibrant neighbourhood. “This is a beehive of activity, with a mix of hard lofts (industrial buildings such as toy factories converted, keeping the exposed brick, exposed ductwork and high ceilings), soft lofts/condos and townhouses,” explains Chan. The King Street area in general is experiencing something of a renaissance for its proximity to the financial district for professionals and bars and clubs for students. At the luxury end, branded hotel residences (Four Seasons, Ritz-Carlton, Shangri-la) remain popular with international investors and the Hazelton, Crystal Blu and Bellair residences are just a handful of projects slated for construction this year that will eventually dot the city’s swish retail district around Bloor Street.

But as is the case with many waterside cities, the lake is where many purchasers want to be. Tsaparis is particularly fond of Harbour Plaza, a new project by Menkes. Scheduled for completion in 2017, it’s a “Landmark building located steps from Harbourfront. It will have direct access to Toronto’s downtown underground pedestrian walkway (PATH), transit and the new direct rail from Union Station to Pearson Airport. The Financial district is moving south to this area. This building will be connected to three office towers (including the RBC’s new office tower currently under construction) and 35,000-plus jobs and will have exceptional water and city views.” But hopefully none of City Hall.